Tax issues will figure prominently in the goings-on in Washington this presidential election year, with the consensus among tax specialists being that Congress is most likely to address the estate tax when it decides late this year whether to extend the Bush tax cuts.
As it stands now, on Jan. 1, 2013, the estate tax will revert back to the 2001 level, which included a $1 million exemption and a 55% rate, from the current 35% top rate and $5 million portable exemption. When Congress addresses the Bush tax cuts, which will most likely be after the election, “an estate tax compromise will be part of that” discussion, says Jeremy Scott, an editor with Tax Analysts.
President Barack Obama said during his State of the Union speech in January that he wants to let the Bush tax cuts expire. “When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings. But we need to do more, and that means making choices,” Obama said. “Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2% of Americans. Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary.”
Obama asked in the speech: “Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else—like education and medical research, a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both.”